Heavy losses in recent fires have increased the cost of insuring high-rise properties in the United Arab Emirates (UAE) at least four-fold, with some policies beginning to take into account loss of business, a UAE-based insurance lawyer said on Thursday.
Michael Kortbawi, Partner at Dubai-based law firm BSA Ahmad Bin Hezeem & Associates LLP said insurance premiums have gone up four to five times for high-rise buildings with old exterior cladding panels that contain flammable elements blamed for the spread of many fires.
"The premiums are going up four to five times due to the fact that insurance companies now understand the risk better and they calculate the risk model based on different standards," he told Thomson Reuters Projects on the sidelines of the Smart Skyscrapers Summit in Dubai.
Kortbawi said he estimated premiums of UAE's Emaar Properties had gone up by the same amount following the New Year's Eve 2015 fire at its Address Downtown hotel.
Emaar said in February it will recover 1.22 billion dirhams ($332.2 million) from its insurance claim for the hotel fire.
"The figures are between 1.2 to 1.3 billion dirhams - at least 400 million loss of business and the rest, about 800 million, is property damage," he said, adding that the information was according to different insurance brokers' sources.
He described the increase of four to five times as "conservative", adding that insurance companies did not properly study the risk or the potential loss of business until the Address' fire.
He also added that insurance companies in the UAE are now evaluating the risks more carefully because they realised the higher probability of fires in skyscrapers with old cladding.
Emaar suffered another major fire at its under-construction Address Residence Fountain Views tower, also located in Downtown Dubai, on April 2. The cause of the fire is still under investigation, Thomson Reuters Projects reported last month.
In January, UAE authorities launched an updated fire code with new safety requirements and tougher enforcement measures, according to a Gulf News report.
The Gulf Arab states' insurance sector was hit hard by the drop in oil prices, and UAE companies have struggled with the increasing costs of health and motor insurances, according to a February report by Thomson Reuters Zawya.
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